COMMODITIES: Oil and Gold Fall into the Fourth of July

In local morning trade, NZGBs are 2bps richer despite US tsys finishing ~2bps cheaper across benchmarks. The NZ-US 10-year yield differential is -4bps at +13bps. 

• US tsys finished well off early session bests after higher-than-expected JOLTS job openings and an up-revision to prior openings.
• The JOLTS report for April was, on balance, one of relative stability in another look at early reaction to Trump administration policies. Job openings surprisingly increased (7391k (sa, cons 7100k) in April after a marginal upward revision of 7200k (initial 7192k) in March), while the hire rate pushed to its highest since September. However, the quit rate pushed back lower again after what to us was a surprising uptick back in March.
• S&P e-minis were just off May 29 highs after the White House announced that President Trump will sign 50% steel and aluminium import tariffs on Wednesday.
• Swap rates are 2-3bps lower.
• RBNZ dated OIS pricing is little changed across meetings. 6bps of easing is priced for July, with a cumulative 30bps by November 2025.
• Today, the local calendar will be empty.
• On Thursday, the NZ Treasury plans to sell NZ$200mn of the 3.00% Apr-29 bond, NZ$200mn of the 4.50% May-35 bond and NZ$50mn of the 5.00% May-54 bond.

The overnight range was 142.61 - 144.11, Asia is currently trading around 143.95. The USD continued from where it left in Asia and was well bid the whole overnight session, retracing nearly all of Monday’s move lower.

• Bloomberg - “Japanese PM Shigeru Ishiba is considering dissolving the lower house of parliament if the opposition submits a no-confidence vote during the current session through late June, local media reported.”
• Reuters - “Japan to promote domestic ownership of JGBs, policy draft shows.” reut.rs/4ktcZY4
• This would have been a frustrating day for the JPY Bulls, though I suppose in hindsight the market should not have been expecting any clear breaks until the NFP data on Friday.
• The market still seems very confident of a move lower in USD/JPY but with positioning quite large now we have seen the risks of pullbacks increase. Resistance around the 146.00 area held perfectly and the JPY bulls would be quite relieved as well as vindicated by the price action.
• A break below 142.00 in USD/JPY and all eyes will once again turn to the pivotal 140.00 area. Sellers should emerge on this bounce back towards the 144.00/145.00 area now.
• Options : Close significant option expiries for NY cut, based on DTCC data: 143.50($698m), 145.00($629m). Upcoming Close Strikes : 140.00($2b June 5), 142.00($1.17b June 5), 148.00($1.21b June 5).
• CFTC data shows Asset managers maintained their already extensive JPY longs, and leveraged funds reduced their longs that had just started to be built up.

• Data/Event : Jibun Bank Japan PMI's

  Fig 1 : USD/JPY Spot Daily Chart

  

  Source: MNI - Market News/Bloomberg

• RES 3: 147.74 - High Jan 15 and bull trigger (cont)
• RES 2: 146.53 - High Aug 6 
• RES 1: 141.48/142.95 - High May 2 / High Apr 7
• PRICE: 139.01 @ 16:09 GMT Jun 03
• SUP 1: 138.54 - Low May 22
• SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg   
• SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg

JGBs have rallied off recent lows, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.